EMBARGO TO 00.01 ON FRIDAY 16 SEPTEMBER Scotch Whisky Association Exports of Scotch Whisky; Year to end of June 2016 (2016 H1) VOLUME UP 3.1% to 531 MILLION bottles VALUE DOWN SLIGHTLY BY 1.0% TO 1.70 BILLION - Volume growth driven by key markets 10 of top 15 markets grew - Single Malt exports go from strength-to-strength Scotch Whisky exports increased in the first half of 2016 (2016 H1) to 149m litres of pure alcohol (LPA), equivalent to 533m bottles of Scotch, up 3.1% on the first six months of last year. The period represents the first return to growth in Scotch Whisky export volumes since 2013. Single Malt, other bottled (Blended) Scotch, and bulk exports all reported increased volumes compared with a year earlier. Given the continued economic volatility and political uncertainty still prevalent in many parts of the world, the results are positive for the industry. Volume growth driven by leading markets Ten of the top fifteen markets reported growth in the first six months of the year. Larger European markets received higher volumes notably a 5% increase to France which will impact the overall European figures. There were also strong export volumes to the Netherlands and Poland both important consumer markets, while also offering important further regional distribution links. Exports to India increased considerably. Volumes to several major Asian markets were strong, but the additional 41% of Scotch exported to the world s third largest market, India, stood out. Scotch Whisky accounts for only 1% of the entire spirits market in India. Given that the market for spirits is due to increase 3% in 2016 (source: The IWSR), it remains an attractive opportunity, despite the high tariffs in place.
Single Malt exports go from strength to strength Single Malt continues to perform well in both volume and value. It accounted for 9% of global Scotch exports in the period, but a full 25% of the total value. The growth in the Single Malt sector reflects the continued movement towards premiumisation, in fact visible also in premium blends as well as single malt itself. These trends are very evident in exports to the most valuable market, the US, where there is growth in value in all categories, with single Malt volumes also increasing strongly too. Overall export value still down The value of Scotch exports in 2016 H1 totalled 1.70 billion, 1.0% down from the same period a year earlier. This continues the slowing in the rate of decline we saw in 2015. It is noticeable also that for most of H1 export value was higher than in 2016. At the end of May 2016 export values were up 2.8% and the overall fall in value is due to a drop in June: it remains to be seen whether this is sustained or reverses out in the rest of 2016. Certainly the devaluation of sterling is likely to have a positive effect on exports over this period.
ANNEX 1: Category and Regional Results Category results Single Malt continued to outperform the overall market with both higher volumes and values in the period while other bottled blended Scotch Whisky volumes were maintained albeit at lower valuations. Single Malt exports increased 3% to 49 million bottles and by 6% to 431 million in value terms. As a proportion of global Scotch Whisky exports, Single Malt accounted for 9% of the volume and 25% of the value. Other bottled (blended) Scotch Whisky accounted for the majority of global exports in both volume (68%) and value (68%). Volumes increased 1% to 362 million bottles while value declined 4% to 1.16 billion year on year. Bulk exports increased 10% to the equivalent of 122 million bottles with the overall valuation 5% higher than a year earlier. Relative to total exports, bulk contributed 6% in value terms while 23% of the volume of Scotch Whisky exports was in bulk. Despite emerging markets having a significant impact on the overall figures, with many markets experiencing some volatility (both positive and negative), the global situation can be broadly characterised by the top two markets for Scotch Whisky: USA and France. France remains the top market in volume terms with the United States being the most valued market (see table for Top Export Markets for Scotch Whisky: Volume and Value; 2016 H1 ). The American market has grown in value terms across all categories; Single Malt continues to perform well and additional value is being achieved in blended Scotch Whisky (albeit with fewer shipments). This performance was achieved despite lower shipments in the period. The French market is categorised by much higher volumes, some 70% higher than those to the US but valued some 46% lower. While there were increased volumes of Single Malt, blended and bulk Scotch Whisky exported to France, blended product (which accounted for 59% of the market) was exported at lower valuations than a year earlier which skewed the overall figures somewhat. Regional results European Union Volumes of Scotch exported within the EU increased by 5%, equivalent to 208 million bottles (and 39% of all Scotch exports) although the associated value decreased 1% to 518 million. Both volume and value were influenced by higher shipments of bottled blended product exported at lower valuations. Almost 21.6 million bottles of Single Malt Scotch Whisky were exported to the EU28 in 2016 H1 (+4%) which were valued at 170 million, a marginal increase on year earlier exports. Almost 146 million bottles of blended Scotch were exported, 9 million (+7%) bottles more than in H12015. The additional volumes exported were some 11 million (-3%) short of year earlier valuations. Bulk exports in both volume and value terms increased by just below 1% to 40 million bottle-equivalents and 33 million respectively. France remains the largest European market in both volume and value terms and also maintained its position as the largest global market for Scotch volumes and second position (behind USA) in terms of value. The French market was categorised by a 6% increase in
deliveries of blended Scotch Whisky albeit there was a marked decline of 12% in export value. Bulk deliveries were up 4% in both volume and value terms with single and blended grain whisky accounting for over a third (36%) of all bulk deliveries (up from below 7% in H12015). Exports to Spain (Europe s second largest market for Scotch and the world s fourth largest) were marginally higher in 2016 H1 compared with the same period in 2016 with a 21% decline in bulk exports being offset by increased Single Malt (+3%) and bottled blended Scotch Whisky (+6%) deliveries. Exports were valued 0.2 million (-0.3%) lower than a year earlier at 71.2 million with bottled blended Scotch Whisky valuations increasing by 1%. Asia 110 million bottles of Scotch Whisky were shipped to Asia in the first six months of 2016, 13% higher than in H12015 and at a marginally higher (<1%) value at 351 million, indicating a similar overall trend to the global figures where values were lower. The majority of the additional volume to the region can be attributed to India, where almost 12 million additional bottles, or bottle-equivalents, were exported a 41% increase to 41 million bottles. While the majority of product was delivered in bulk, there was also a considerable uplift (>50%) in the volume of Single Malt exported to over 700,000 bottles. While volume increases can be expected given the re-structuring within the Indian industry in recent years, the valuation of exports to Indi has bucked the global trend with Single Malt valued some 1.3 million higher (+60%). Bulk valuations were also up by a third which, while not in line with the volume uplift, indicates that the additional volume has not been discounted as greatly as it has in some other markets. Almost 19 million bottles of Scotch were shipped to Singapore in 2016 H1, 15% higher than in H12015 valued at almost 100 million, 8% higher than a year earlier. Additional bottled blended Scotch was the driver for both volume and value shifts. The market in Taiwan experienced a reduced volume of Scotch Whisky exports in 2016 H1, by 8% to 8.6 million bottles. The majority of the decline was a result of 500,000 fewer bottles of Single Malt exported. There was also a corresponding decline in value to the market driven by bottled blended valuations. North America In 2016 H1, 77 million bottles of Scotch were exported to North America, seven per cent less than a year earlier. Despite fewer exports nominally, North America was 6% higher in value terms, worth 426 million in the first half of the year. While bulk volumes were down by 7%, value also decreased by a similar proportion. The majority of the reduction in volume was a result of 4.6 million fewer bottled blended deliveries to 55 million. Despite this shortfall year on year, the value of bottled blended exports increased by 3.8 million resulting in a significant increase in the value per bottle exported. The USA was the primary driver for the increased value in the region with exports valued at 357 million, 9% higher than the first six months of 2015. Single Malt accounted for 108 million of exports to the USA, a 22% increase year on year resulting in Single Malt Scotch accounting for 30% of the total value of the market. This strong performance in valuations was despite overall deliveries to the USA declining by 3% in the period. The performance of exports to Canada declined 6% in the first half of 2016 to 5.5 million bottles. While this represents a year on year decline, there was a 10% jump in exports in H12015
Exports to Mexico declined by the equivalent of 3 million bottles (15%) to 18.5 million in 2016 H1 compared with year earlier figures predominantly due to reduced shipments of bottled blended products (which accounted for 94% of total exports). The value of exports in the period was down by a corresponding 16% with 32.3 million worth of bottled blended exports. Central and South America An additional 2.7 million bottles (+5%) of Scotch Whisky was exported to Central and South America in 2016 H1, totalling 62.4 million bottles and valued at 147 million (-11%). Bottled blended Scotch continued to account for the majority of product (76%) exported and the growth in volume, at lower valuations, was the largest driver behind the changes. Single Malt in the region increased 28%, albeit from a small base, to 357,000 bottles. Volatility was apparent across the region in the majority of markets with some large fluctuations in both volumes and values. Exports, Central and South America 2016 H1 Market Share (Volume) Volume Value Total 62.4m bottles +5% -11% Argentina 6% +25% +16% Brazil 39% +4% -2% Chile 9% +30% +8% Colombia 6% +22% -2% Dominican Republic 5% -3% +7% Panama 8% -17% -10% Peru 5% -2% -6% Uruguay 8% +5% +3% Venezuela 4% +74% -24% Volumes exported to Brazil provided some stability to the region as they increased by 4% in the period, a significant improvement following dramatic declines experienced a year earlier which were a result of the ongoing political and economic difficulties. Increased shipments of both bottled blended product and Single Malt led to higher volumes albeit reduced valuations of blended product led to an overall market valuation decline of 2% to 28.2 million. The Brazilian market represents 38% of Scotch Whisky exports to the region. While the Brazilian market showed some signs of stabilising, other markets in the region skewed the overall figures to some degree. For example, volume growth was tempered somewhat by a 17% contraction in the volume of exports to Panama and while volumes exported to Venezuela increased considerably (+74%), values reduced by 24%. In the Dominican Republic, the generalised trend was bucked somewhat given that volumes were down 3% as a result of lower bulk exports but values increased 7%. Volumes of bottled, both Single Malt and blended, product remained largely comparable with the same period a year earlier although the value associated with the exports increased 36% and 9% respectively. Africa Volumes of Scotch Whisky exported to Africa in 2016 H1 were 9% down compared with H12015 to 27 million bottles and were characterised by a shift in the volume of bulk exported towards bottled product (both Single Malt and bottled blended Scotch). Single Malt exports edged towards 3% of total exports to Africa while bottled blended product accounted for 56% of
exports. Despite the value of Single Malt increasing by over 15%, bottled blended product was valued at 56.6 million, some 11 million lower on the year (-17%). With South Africa accounting for almost 70% of exports to the region, the market heavily influences the overall figures. Approximately 84% of exports to South Africa are shipped as blended bottled product Other markets in the region have displayed considerable volatility, with considerable growth in both volume and value to four of the top seven markets with Kenya, Morocco, Nigeria and Uganda each reporting growth in volumes of 50% to over 200% (in the case of Nigeria). The counter-balance to the improvements in shipments to a range of markets is that Angola, usually the second largest market in the region, received a quarter of the Scotch delivered in H12015 (with a corresponding drop in value). Other Markets Exports to Turkey declined in the period by 19% in volume and 18% in value. While the market has experienced strong and consistent growth in recent years, the reduction is not necessarily surprising there has been an impact given the domestic and international challenges facing the industry in Turkey. Despite both Single Malt and bottled blended Scotch Whisky exports reducing considerably (32% and 24% respectively), bulk volumes increased notably 35%, albeit from a low base.
ANNEX 2 - Exchange Rates Sterling depreciated to its lowest value in 30 years against the USD following 23 June EU referendum in the UK. The Euro suffered too, declining by the largest drop in any one day since it started trading as safe-havens were found in the US dollar and Japanese Yen. Stocks and shares were also initially impacted in the FTSE100, specifically housing and banking - although the knock on effect was more significant in the financial centres of Germany and France due to the threat of contagion. While the impact of the sharp depreciation in June will not have been recorded in these figures, the trend during the period was for a lower-valued pound which may have generated some increased activity in some markets. It is likely that the upcoming period will see the impact of the new valuation of Sterling although there will probably also be some caution with regard to exchange rate expectations or forecasts. Volatility remains in both the financial and currency markets, however Sterling remains considerably lower-valued compared to a few months ago. Effectively importers of Scotch Whisky will be able to purchase the same volume of products at a lower (domestic) price. While the impact of other factors, such as trade negotiations and domestic economic performance should not be ignored, the exchange rate impact should offer some positive conditions for exporters to offset to some degree other disruptive factors in the market.
ANNEX 3 Top export markets by volume and value Top Export Markets for Scotch Whisky: Volume and Value; 2016 H1 Rank Country Volume (bottles) Rank Country Value ( GBP million) 1 France 90,906,935 1 USA 357.4 2 USA 53,108,132 2 France 193.1 3 India 41,012,693 3 Singapore 99.6 4 Spain 29,261,275 4 Taiwan 74.7 5 Brazil 23,649,075 5 Spain 71.2 6 Germany 21,712,721 6 Germany 65.9 7 South Africa 18,695,075 7 United Arab Emirates 63.2 8 Singapore 18,656,800 8 Australia 43.7 9 Mexico 18,516,668 9 India 42.6 10 UAE 13,492,489 10 South Korea 42.0 11 Japan 13,132,575 11 South Africa 39.9 12 Australia 12,563,393 12 Mexico 36.6 13 Netherlands 12,105,235 13 Japan 35.9 14 Poland 10,680,946 14 Netherlands 35.7 15 Thailand 9,673,154 15 Canada 31.7 16 Taiwan 8,622,193 16 Brazil 28.2 17 South Korea 7,453,979 17 Turkey 26.2 18 Italy 6,963,721 18 Poland 21.4 19 Turkey 6,373,014 19 Panama 18.8 20 Latvia 5,754,117 20 Latvia 18.7 Source: HMRC, SWA
ANNEX 4 Scotch Whisky Global Exports Infographics; Volume and Value